***

Letter from Iqbal Surve to staff, 31 March 2020

31 March 2020

Dear Colleague,

I hope this communication finds you and your family well and coping under the most difficult circumstances and conditions that we have ever, collectively, had to face as a country, even as a world.

It cannot have escaped you how we are in the midst of a pandemic, which has impacted not just South Africa, but the entire globe. To avoid the rapid spreading of the disease to family, friends, work colleagues and our communities, South Africa took the early and bold step to embrace a lockdown. This has consequences.

I will not deal with the dangers to the health and welfare of our people since this is, by now, well documented. Neither, will I detail in this letter the steps that we need to take to protect ourselves from this virus since this too, is well documented.

I do want to thank those employees who continue to work and put their lives at stake in order to provide essential services to the broader community. I know that I speak on behalf of the entire Sekunjalo Group, when I say that I am sincerely grateful to you for your commitment, dedication and sacrifices that you are making in this regard.

Likewise, it is important to acknowledge and show our appreciation to the hundreds of people at the forefront who are directly impacted by this situation – the healthcare workers, security personnel, drivers and many others who are risking their lives, to make sure our country can function, and that communities are protected as much as possible, against the potentially harsh impact of the virus on us all, especially our most vulnerable of society.

This virus has created a real black swan event – something that was completely unexpected – yet, something that was a known unknown. For a long time, the world was aware that viruses can mutate form animals to humans and create global pandemics. What has made this virus particularly life threatening though, is not only its ability to spread rapidly but, it does not discriminate – it has attacked older and immune compromised individuals, as well as young people and those without pre-existing respiratory conditions.

It is fair to say that the virus has caused a devastating impact on all of our lives – on our health, welfare, physical and mental wellbeing – and those of our families and friends.

Although we have been fortunate to date in that we have had no persons in our group who have been infected, it sadly does not mean we will not be affected in the near future.

There have however, been many other health-related consequences such as stress, anxiety, mental illness and other issues brought about, in particular, by the lock down of people being confined to their homes as well as the uncertainty that the virus may bring into their future.

Apart from the huge impact on the health and welfare of our country, the virus has brought about a severely negative impact on global economies, including South Africa’s. No business will be left untouched by this virus.

What we do not know is how severely and for how long, it will impact our businesses. In wealthier and more developed countries, governments have been able to provide aid and assistance to businesses and workers, in the form of a significant percentage of the GDP and in some cases, this has resulted in almost 10% of the GDP. In the case of the USA, the government recently injected $2 trillion into its economy with the real prospect of a further $2 trillion if required. The United Kingdom and the European Union have, to date, invested almost a trillion Euros into their economies. China, similarly, took measures to stimulate and protect both the Chinese people and Chinese businesses.

Our government, due to its poor financial fiscal position, has not been able to invest much into the economy and in fact, it appears that South Africa is at the bottom of the pile, having only allocated 0,1% of GDP to date, to deal with the impact of the coronavirus, compared to economies that have generally invested upwards to almost 12% of GDP. Our Finance Minister has already admitted that he may need to go to the World Bank and the International Monetary Fund (IMF) for assistance.

This, unfortunately, is the harsh reality that we as business and as individuals face. We really are on our own. Whilst there is some support, indicated through the unemployment insurance fund (UIF), it has very clear conditions, which may well not be applicable to most of our businesses and in any event, would not have a material impact on our businesses.

All of this means that we have to take matters into our own hands. We have to think carefully and plan scientifically about the impact of this virus on the businesses that we own.

On the one hand, we have always been fortunate as the Sekunjalo Group consists of diversified businesses in many different sectors of the economy, that generally balance out the status quo of daily business. This diversification has meant that over the years, we have been able to weather many storms.

This time, however, each and every one of our businesses are affected. The diversification whilst it is helpful, does not offer us the same level of protection that we have had in previous economic crashes, such has the 2008 global financial crash. What we are now witnessing, is effect on bottom line, operations, our employees, our customers and suppliers. No-one has been left untouched.

Our businesses have all been affected to different degrees and extent. Some far more than others, because they may not be deemed essentials services, although even as an essential service, revenue streams are dry due to shrinking customer bases. A poignant example, is how our loyal advertisers who want to advertise, are no longer able to do so, because of the lockdown. It is a double-edged sword.

The end result is that as a Group, we need to make some very difficult decisions.

I have in the last week, spent a considerable amount of time engaging with the senior executive management teams of each of our businesses. This engagement was to establish what would be the impact of Covid-19 on their respective businesses, and secondly, to ensure that they take all the necessary safety, health and welfare measures to secure our employees, in compliance with government regulations.

This has been tiring, time consuming and extremely stressful for all of us. Whilst there is great uncertainty about the black swan environment we find ourselves in, more importantly, there are several unknowns about our local and global recovery from this situation.

Scientists and economists have suggested that the economic impact of the virus will be felt for many years to come. The immediate bearing is that many businesses will struggle to survive.

I have therefore asked each of the businesses to come up with a short, medium and long-term view as to the perceived impact of the virus on their businesses and to plan accordingly. This is a very dynamic intervention, in that the executives and I will engage twice weekly, to evaluate whether we are sitting in either one of the three scenarios and what measures we need to take in order to protect our businesses and employees.

I have asked each of the senior management teams to communicate directly with you and explain the specific steps that they will take to safeguard their business.

We have a number of objectives in terms of the interventions that we must make.

Firstly, we have to ensure the health and safety of our employees. We are currently in the process of procuring PPE’s and sanitisers for our employees exposed and providing essential services.

Secondly, I have asked senior management teams to look at the measures they can take that do not involve direct impact on their employees’ salaries. Where this is not sufficient, to then engage with employees regarding salary reductions, this is in order to safeguard the business as a whole. The objective is to ensure that we have enough liquidity and cash flow across the Group to sustain us for at least six months.

My personal view is that the crisis is at a very early stage in South Africa, and we will only see the full impact on the health sector and economy in a few months from now.

Therefore, our planning at a short term should be six months, and the medium term, a 12-month period. These interventions will be scientific, based on data, and be actively managed so that we are able to respond upwards and downwards as needed.

I will lead this initiative with my colleagues and will do so very carefully, taking every consideration into account. I will continue to update you on what we are doing as a Group. In turn, I will request the senior management teams to update you on a weekly basis on the status of these interventions.

We are in a crisis. A very severe crisis. I cannot stress that enough. We have to protect our businesses and like the swift action taken by government to slow the spread of the virus, we have to act fast if we are going to keep our people employed and able to ensure that once the crisis is over, that we all survive.

Of course, some of our businesses are in a stronger position than others. I have made the extraordinary request to senior management from those businesses that are financially sound, to consider supporting those under more pressure. I have had positive responses from these teams and Boards of directors, who now work together as a group, and stand united to defeat the impact of the virus.

The reality is that we will need to assess the situation weekly, even daily, and adjust our strategies and our interventions to take into account this ‘new normal’.

One thing is for certain, everything has changed, forever. Nothing is going to be the same again. We have to get used to a world of great uncertainty from a health and economic point of view, a world where people engage differently, and a world where the added value that people want, will be very different than before.

My thoughts are with you at this very difficult juncture in our country.

I wish you safety, good health, continued wellness and I ask that you take all the necessary precautions you need to protect yourself and your families.

Yours sincerely

Dr Iqbal Survé Chairman

***

Letter from COO Takudzwa Hove to staff, 3 April 2020

Dear Colleague

Re: Impact of measures by the Government to contain the spread of COVID-19

By now most of us are starting to fully comprehend the impact the coronavirus2 (SARS CoV 2) is having on economic activity on a global scale. In South Africa, the government has implemented a mandatory 21-day lockdown period to slow down the spread of the virus.

Our business falls within the ambit of the gazetted “essential services” industry and as such the Company together with is support structures in printing and distribution have continued trading.

Sadly, our clients on the advertising side of the business have significantly scaled down the scope of their activities. Over the last week, we have seen an increase in the rate of cancelation of advertising bookings that had been previously committed. This is across all sectors with limited advertising coming from the traditional retail sector and the public sector. Single copy sales have also been negatively affected due to reduced foot traffic into the shops.

The revenue levels we are currently achieving are insufficient to maintain our cost structures which were already bloated prior to this event. Early indicators for the month of April per discussions with various commercial heads in the business are that we will miss the revenue targets by as much as 40%- 60% in some sectors.

We reacted to the anticipated revenue declines almost immediately and as from 18 March 2020, the following amongst many measures were put in place:

reduced print orders by eliminating airport copies, copies to schools, other community areas (NIE copies and promotional copies;

reduced pagination across all our titles plus running all our supplements ROP;

reduced the distribution footprint where single copy sales were expected to drop significantly;

evoking force majeure on contractual obligations that can’t be fulfilled due to the lockdown;

suspended use of editorial freelancers, contributors and columnists until the situation normalises; and

various other measures.

Even with the savings from printing and distribution being factored in, we anticipate a significant widening trading deficit. Prior to this, the business already had a trading deficit which was being funded by the shareholders. The business therefore has no room or capacity to cushion the widening trading deficits.

Our payroll bill is one of our highest expenditures. Unfortunately, we are left with no alternative but to take the extreme measure of applying a salary reduction. This will come into effect from this month of April until such a time as the situation has normalised.

Salary reductions will apply to all employee grades as follows:

The final scenario to be applied will be dependent on an additional assessment of performance indicators and trading forecasts of the Group in two weeks’ time i.e. as of 17 April 2020. This will be communicated to all staff via HR by 21 April 2020. Please also contact HR to get a clearer implication on the impact to your take home salary as the impact of these cuts may not necessarily result in a corresponding cut to your actual take home salary.

In addition, the following measures will also be put in place were applicable:

we are exploring suspension of pension and provident fund contributions to leave more cash in employees pockets given the turbulence in the stock markets;

50% reduction for all post-retirement medical aid contributions for retired employees that are still receiving income from us;

medical aid contributions and all risk premiums (Group life cover and disability cover) remain.